Market Share Liability New York Style: Negligence in the Air

In its famous Palsgraf decision, the Court of Appeals of New York faced the issue whether, given that a defendant acts negligently towards someone, this negligence gives rise to liability to an unforeseeable plaintiff. Judge Benjamin Cardozo concluded that proof of negligence in the air, so to speak, will not do. Because the defendant’s conduct did not pose an unreasonable risk of harm to the particular plaintiff, and the damage to her was unforeseeable, the fact that the conduct was unjustifiably risky to another was irrelevant.

Market Share Liability New York Style: Negligence in the Air, Missouri Law Review, Volume 55, Issue 4, Article 7, Fall 1990.

In a recent decision, the highest court of New York adopted a theory of market share liability that strays from Cardozo’s foreseeability theory. The New York court added a new twist to “traditional” market share liability and held that a defendant could be liable even if the defendant can show that it did not make the particular drug that injured the plaintiff. This Note evaluates the New York approach, with particular emphasis on the consequences of holding a defendant liable for “negligence in the air.”

I. FACTS AND HOLDING

Hymowitz v. Eli Lilly and Co. consolidates four cases in which plaintiffs alleged injury resulting from their mothers’ ingestion of the drug diethylstilbestrol (DES) during pregnancy. Various manufacturers of the drug were joined as defendants in the underlying actions.

DES is a synthetic form of the female hormone estrogen. Production of DES is much cheaper than isolating natural estrogen. From 1947 to 1971 the drug was marketed for human miscarriage prevention. In 1971, however, the Food and Drug Administration (FDA) prohibited the use of DES for this purpose. Studies linked the use of DES with vaginal adenocarcinoma, a form of cancer, and with adenosis, a precancerous vaginal growth, in the female offspring of DES users. Because an estimated one-half to three million women used DES during pregnancy, the potential monetary damages to users’ daughters is estimated in the billions of dollars.

Potential DES plaintiffs face a virtually impregnable bar to recovery under traditional tort principles. This bar stems from the difficulty in’ identifying a particular DES manufacturer and from the latent nature of DES injuries. It is estimated that, during the 24 years in which DES was approved for use during pregnancy, as many as 300 companies may have produced the drug. Further, DES is a generic drug, meaning that each manufacturer uses an identical formula in production. Thus, druggists usually fill prescriptions from whatever source is on hand.

The long gestation period also clouds the identification issue. The Hymowitz court stated:

Memories fade, records are lost or destroyed, and witnesses die. Thus the pregnant women who took DES generally never knew who produced the drug they took, and there was no reason to attempt to discover this fact until many years after ingestion, at which time the information is not available.

Because of the latent nature of DES injury, many DES cases are barred by the statute of limitations before discovery of the injury. The traditional New York rule was that “the limitations period accrued upon exposure in actions alleging personal injury caused by toxic substances.” This “exposure rule” made it practically impossible for DES plaintiffs to recover. In 1986, however, the New York Legislature enacted a “discovery rule” for “the latent effects of exposure to any substance.” Thus, the statute of limitations clock does not begin to tick until discovery of the injury.

While helping DES plaintiffs, this legislative action does not resolve the identification issue. In the Hymowitz cases, the defendants moved for summary judgment on the grounds that the plaintiffs could not identify the particular manufacturer of the particular drug that purportedly injured them. In three of the four underlying actions the defendants also moved on statute of limitations grounds. The defendants alleged that a New York statute reviving causes of action for DES exposure for one year was unconstitutional. The trial court denied all motions. Particularly, on the statute of limitations defense the trial court granted plaintiffs’ cross motions, which eliminated defendants’ affirmative defense that the actions were timebarred.

On appeal, the New York Supreme Court, Appellate Division, affirmed in all respects. It certified the following question to the court of appeals: “whether a DES plaintiff may recover against a DES manufacturer when identification of the producer of the specific drug that caused the injury is impossible. The New York Court of Appeals answered yes. It held that a market share theory, using a national market for determining liability, was the appropriate method for determining liability and apportioning damages in DES cases in which identification of a particular manufacturer was impossible.

II. LEGAL BACKGROUND

The seminal case on market share liability is Sindell v. Abbott Laboratories. The fact pattern presented to the California Supreme Court in Sindell was very similar to that presented in Hymowitz. The Sindell court stated that generally there can be no liability without a specific showing that defendant caused plaintiff’s injuries. The court noted, however, this general causation rule was not without exceptions. The Sindell court proposed and adopted a new basis of liability for this situation; it based its proposal on a modification of an existing exception to the causation rule.

The first and most important exception examined by the California court was the so-called “alternative liability” theory as set forth in Summers v. Tice. In Summers, the plaintiff was negligently shot by one of two hunters using identical guns and ammunition. Although the plaintiff could not prove which of the two defendants actually caused his injury, the court held the defendants jointly and severally liable. The defendants could, however, escape liability by showing they could not have caused plaintiff’s injury. The Sindell case did not find the alternative liability theory applicable because of the large number of DES producers and because of the long latency period involved in DES claims.

The court also discussed a second exception to the traditional causation requirement, the theory of “concert of action. The Sindell court quoted the RESTATEMENT (SECOND) OF TORTS, providing that

for harm resulting to a third person from the tortious conduct of another, one is subject to liability if he

(a) does a tortious act in concert with the other or pursuant to a common design with him,
or (b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself,
or (c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.

Because there was no evidence of an express or tacit agreement between manufacturers to engage in tortious conduct, there was no viable cause of action under the concerted action theory.

Finally, the Sindell court discussed the theory of “enterprise liability” posited in Hall v. E.L Du Pont de Nemovis & Co., Inc. In Hall, several children were injured by blasting caps. Unfortunately, the plaintiffs could not identify the specific manufacturer of the injury-causing product. The court imposed liability on the entire domestic blasting cap industry, which consisted of six manufacturers. The court specifically found that those six entities jointly controlled the risk. The court also focused on the parallel behavior present in the establishment of industry wide safety standards. Thus, “under this industry-wide liability theory, the existence of industry wide standards or practices may support a finding of joint control of risk and shift the burden of proving identification to the defendants.” This theory however, has never been adopted by any other court.

The Sindell court rejected the theory of enterprise liability, and noted that in the Hall case there were six possible manufacturers, while in the DES situation there were at least 200. Further, the court relied on the absence of concert of action for the proposition that defendants did not jointly control the risk. Also, the drug industry is monitored by the Food and Drug Administration; therefore, the industry standard is suggested by the government rather than by industry consensus.

Modifying the Summers v. Tice alternative liability theory, the California Supreme Court adopted a new theory of market share liability. The Sindell court first changed the Summers requirement that all potential defendants be before the court to a requirement that a “substantial percentage” be joined. Next, the Sindell majority held “each defendant will be held liable for the proportion of the judgment represented by its share of that market unless it demonstrates that it could not have made the product which caused plaintiff’s injuries. Thus, a defendant can exculpate itself by showing it could not have made the injury-causing product. The court rationalized that under this approach, each manufacturer’s liability would approximate its responsibility for the injuries caused by its own products.

The Sindell decision left open the question whether the liability imposed would be joint and several or several only. In Brown v. Superior Court, the California Supreme Court resolved this ambiguity, by providing that each defendant’s liability under market share is several only. An individual manufacturer’s liability cannot be inflated to allow for the full recovery of plaintiffs’ injuries. Thus, in California liability cannot exceed a given company’s market share.

The Wisconsin Supreme Court adopted its own version of market share liability in Collins v. Eli Lilly Co. It declined to follow the Sindell approach, and held instead that “unalloyed market share theory does not constitute the most desirable course to follow in DES cases because the theory, while conceptually attractive, is limited in practical applicability. By practical inapplicability, the court was referring to “the practical difficulty of defining and proving market share.”

The Wisconsin approach begins with the general proposition that each defendant contributed to the risk of injury to the public … thus each defendant shares, in some measure, a degree of culpability in producing or marketing … a drug with possibly harmful side effects. Under this approach, the plaintiff’s prima facie case consists of establishing by a preponderance of the evidence that a defendant produced or marketed the type (e.g., color, shape, markings, size, or other identifiable characteristics) of DES taken by the plaintiff’s mother.

Once the plaintiff has alleged a viable cause of action, the burden of proof shifts to the defendant to prove by a preponderance of the evidence that it did not produce or market the subject DES either during the time period the plaintiff was exposed to DES or in the relevant geographical market area in which the plaintiff’s mother acquired the DES. The Collins court held that determination of liability was a jury question to be answered in the context of Wisconsin’s comparative negligence doctrine. According to the court, market share remains an important factor for the jury’s consideration. The goal of the Wisconsin approach appears to be to allow the jury to hold a defendant liable in proportion to the amount of risk it created that the plaintiff would be injured by DES. This risk-based approach resembles market share liability only when a jury is allowed to consider market share in making its assessment of the proportion of risk of injury for which a defendant is liable.

Shortly after Collins, the Washington Supreme Court adopted another version of DES market share liability in Martin v. Abbott Laboratories. The Washington version, styled “market share alternative liability,” claims justification in that “each defendant contributed to the risk of injury to the public and, consequently, the risk of injury to individual plaintiffs.” The Washington court did leave defendants an out: Individual defendants are entitled to exculpate themselves from liability by establishing, by a preponderance of the evidence, that they did not produce or market the… DES taken by plaintiff’s mother . . .

An interesting aspect of the Washington methodology is that defendants who fail to exculpate themselves are “presumed to have equal shares of the market and are liable for only the percentage of plaintiff’s judgment that represents their presumptive share of the market.” A defendant may rebut this presumption by introducing evidence to establish respective market share. If proven, a particular defendant is liable only for the percentage of the total judgment corresponding to the company’s market share. The liability of unexculpated defendants, however, is inflated to allow for a 100% recovery.

The Washington Supreme Court further developed its theory in George v. Parke-Davis, a subsequent DES decision. First, the determination of market share is a question of fact in each case. Second, depending on the circumstances of a particular case, the relevant market may be as small as the local pharmacy or as large as the country. The court stated “the relevant market for determining liability should be as narrow as possible”.

III. THE INSTANT DECISION

A. Rejection of Accepted Tort Doctrine

Judge Wachtler, author of the majority opinion, began by rejecting the established tort doctrines of alternative liability and concerted action: He stated “we agree with the near unanimous views of the high [s]tate courts that have considered the matter that these doctrines in their unaltered common-law forms do not permit recovery in DES cases.

Relying on Summers v. Tice, the Hymowitz court stated the rule of alternative liability as “where two defendants breach a duty to the plaintiff, but there is uncertainty regarding which one caused the injury, the burden is upon each such actor to prove that he has not caused the harm. The court stated that “the central rationale for shifting the burden of proof in such a situation is that without this device both defendants will be silent, and plaintiff will not recover; with alternative liability, however, defendants will be forced to speak, and reveal the culpable party, or else be held jointly and severally liable themselves.

The court postulated that in order to invoke the doctrine of alternative liability, the defendant must have better access to information than the plaintiff, and all possible tortfeasors should be joined in the action. Further, the court stated “alternative liability rests on the notion that where there is a small number of possible wrongdoers, all of whom breached a duty to the plaintiff, the likelihood that any one of them injured the plaintiff is relatively high, so that forcing them to exonerate themselves, or be held liable, is not unfair.

The Hymowitz court ultimately held the large number of potential tortfeasors and the long time period between ingestion and injury created problems for this traditional tort theory. Defendants did not have the requisite better access to information, and it was virtually impossible to have all possible producers before the court. The court seized also on the issue of fairness, holding “while it may be fair to employ alternative liability in cases involving only a small number of potential wrongdoers, that fairness disappears with the decreasing probability that any one of the defendants actually caused the injury.” In DES litigation the chance a particular defendant actually caused the injury in question is often very remote. Therefore, alternative liability provides no relief.

Next, the court dealt with the theory of concerted action. Analogizing to drag racing cases, it stated the theory provides for joint and several liability on the part of all defendants having an understanding, express or tacit, to participate in ‘a common plan or design to commit a tortious act.

The court conceded the drug companies had engaged in parallel conduct in producing DES from an identical formula. There was, however, no evidence of any agreement to market DES in an unsafe manner.9 ” The court concluded “parallel activity, without more, is insufficient to establish the agreement element necessary to maintain a concerted action claim.”

Although the traditional common law doctrine provided plaintiffs with no relief in Hymowitz, the court rationalized that “judicial action is … required to overcome the inordinately difficult problems of proof caused by contemporary products and marketing techniques.”‘ Thus, the court opened the door for the imposition of market share liability.

B. Market Share Liability

In looking to non-traditional forms of relief, the Hymowitz court stressed that in the DES situation, “it is more appropriate that the loss be borne by those that produced the drug for use during pregnancy, rather than by those who were injured by the use, even where the precise manufacturer of the drug cannot be identified in a particular action.” Policies of fairness and justice mandated judicial relief.

First, the court had to deal with its previous DES decision in Bichler v. Eli Lilly & Co. Some commentators interpreted Bichler to create a modified form of the concerted action doctrine. In Bichler, the court submitted jury instructions substituting “conscious parallel activity by manufacturers” for the traditional common law requirement that a plaintiff prove “actual or tacit agreement to participate in a common plan to commit tortious behavior.” Because of the defendant’s failure to object, “the modified concerted action theory became the law applicable to that particular case.”

The Hymowitz court, however, refused to adopt this modified concerted action theory as the general law of the state. It held

inferring agreement from the fact of parallel activity alone improperly expands the concept of concerted action beyond a rational or fair limit; among other things, it potentially renders small manufacturers, in the case of DES and in countless other industries, jointly liable for all damages stemming from the defective products of an entire industry.

Parallel behavior is too common in modern industry to warrant the imposition of liability.

Finally, the Hymowitz court turned to the concept of market share liability. After examining the various forms of market share liability adopted in other jurisdictions, the court posed its own solution. Relying primarily upon California’s experience, the court concluded “a market share theory, based upon a national market,” provided the practical solution. The court explicitly rejected the Wisconsin “assessment of risk” approach, finding this methodology would prove too burdensome and inconsistent over the long run.

The court realized the adoption of a market share liability theory using a national market would probably result in a disparity between an individual manufacturer’s liability and the actual injuries caused by that manufacturer in New York. Thus, the Hymowitz policy differs from the Sindell policy. Liability is not expected to correspond with causation over the long run of cases. Further, the court recognized that the use of a national market would not necessarily result in liability in proportion to the risk created by a defendant towards a particular plaintiff. The Hymowitz court chose “to apportion liability so as to correspond to the overall culpability of each defendant, measured by the amount of risk of injury each defendant created to the public-at-large.”

C. The “New Twist”

In contrast to previous versions of market share liability, the Hynowitz court refused to excuse a defendant from liability upon a showing that it could not possibly have manufactured the particular drug which injured the plaintiff. The court stated that because liability here is based on the over-all risk produced, and not causation in a single case, there should be no exculpation of the defendant who, although a member of the market producing DES for pregnancy use, appears not to have caused a particular plaintiff’s injury. The majority rationalized that it is merely a windfall for a producer to escape liability solely because it manufactured a more identifiable pill, or sold only to certain drug stores. These fortuities in no way diminish the culpability of a defendant for marketing the product, which is the basis of liability here. The majority did concede that a defendant could not be held liable if it did not make DES for use during pregnancy.

Finally, the Hymowitz court found DES producers severally liable, not jointly and severally liable as had other jurisdictions. Liability should not be inflated when all participants in the market are not before the court in a particular case. The court realized its rule would result in some plaintiffs failing to recover their total damages. The court explained that because it refused to allow a defendant exculpation from liability, it would not be fair to increase a defendant’s liability beyond its fair share of responsibility.

D. Judge Mollen’s Opinion

Judge Mollen concurred in two of the underlying cases and dissented in part in the remaining two. Mollen agreed with the majority that market share liability based on a national market was the proper theory for the plaintiffs to pursue. He would, however, allow exculpation of a defendant who could prove, by a preponderance of the evidence, that it did not manufacture the particular pill taken by the plaintiff’s mother. Further, he would allow joint and several liability in order to ensure that a particular plaintiff obtains full relief.

Judge Mollen noted that in the California, Wisconsin, and Washington approaches, a defendant could exculpate itself by proving it could not have made the specific drug taken by the plaintiff. He realized “to preclude exculpation would directly and unnecessarily contravene the established common-law tort principles of causation.” Mollen contended the majority “provides DES plaintiffs with an unprecedented strict liability cause of action.” He maintained the majority’s rationale is “unfair and inequitable” to those defendants who could prove they did not manufacture the drug in question. In Mollen’s opinion, the majority was merely adopting the Bichler “modified concerted action” theory which they explicitly purported to reject in their opinion.

Judge Mollen appears to embrace the Sindell approach. He advocates

the shifting of the burden of proof on the issue of causation to the defendants and he would impose liability upon all of the defendants who produced and marketed DES for pregnancy purposes, except those who were able* to prove that their product could not have caused the injury.

Judge Mollen further advocates imposing joint and several liability on those defendants who are unable to exculpate themselves. Mollen’s version of market share liability differs from Sindell in this respect. Joint and several liability ensures plaintiffs a full recovery for their injuries.

This procedure also provides defendants with an incentive to implead DES manufacturers not joined by the plaintiff. This opportunity reduces unfairness to innocent defendants. Mollen claims this approach furthers the “valid public policy of imposing the burden of bearing the cost of severe injuries upon those who are responsible for placing into the stream of commerce the causative instrumentality of such injuries. Finally, Judge Mollen concludes the majority engages in judicial legislation by eliminatinh fundamental causation requirements.

IV. COMMENT

This Note uses the policy behind tort law and products liability as a framework for analysis. This policy framework warrants a terse review. Further, the Note examines attempts to expand market share liability outside the DES arena, and evaluates a potential legislative solution.

A. Policy Framework

Compensation and deterrence are the two most widely announced purposes underlying tort law. Other frequently mentioned purposes are the assessment of moral blame in the eyes of society, and the punishment of wrongdoers. A major purpose of the cause in fact requirement in tort law is to limit the scope of potential liability. Professor David Fischer writes that the “cause-in-fact requirement is one way in which the law limits the scope of liability and attempts to avoid discouraging socially desireable activity.”

There are six generally recognized goals of a strict products liability regime. These goals include

compensation (or loss spreading);
deterrence;
encouraging useful conduct;
overcoming proof problems;
protection of consumer expectations;
and cost internalization.

The compensation goal is based on the premise that in our modern society injuries to individual consumers caused by the use of complex products are inevitable. Because of the gravity of potential injury, it is fair to impose liability on the manufacturers of these products who can, in turn, shift the loss back to consumers via price increases or insurance.

The deterrence goal rests on the proposition that the threat of liability motivates manufacturers to make safer products. Strict liability is believed to be a stronger deterrent than negligence. Under a negligence standard a manufacturer is held to a reasonable person benchmark, while the strict liability standard may require a manufacturer to go beyond this reasonable person criterion if the cost of added safety is less than the cost of potential liability.

The third goal, and perhaps the most important for purposes of analyzing the New York version of market share liability, is encouraging useful conduct. The deterrence and compensation goals nearly always indicate liability. Yet, until the New York version of market share liability:

no court has imposed the liability of an insurer on manufacturers by requiring them to pay for all harm caused by their products. This is because of the fear that such absolute liability would place unreasonable burdens on manufacturers and discourage them from producing useful products. The policy of avoiding over-deterrence by balancing the needs of defendants against needs of plaintiff is clearly at work, although it is seldom articulated.

The fourth goal of products liability law is to help plaintiffs overcome difficult proof problems. Often the defendant is in a much better position than an individual plaintiff to prove fault or lack of fault. Some commentators conclude that the market share liability theory reflects courts policy judgment that as between an innocent plaintiff and defendants who are allegedly guilty of some wrongful conduct, the plaintiff should prevail-even if the alleged (not necessarily established) conduct in question did not cause .the plaintiff’s injury. In products liability actions courts often simplify the plaintiff’s prima facie case or shift the burden of proof on an issue to the defendant.

The final two commonly articulated goals of product liability law include the protection of consumer expectations and the policy of cost internalization. The consumer expectation policy is grounded in the notion that manufacturers induce consumers to rely on safe products, thus the consumer should be protected from hidden perils. The cost internalization goal depends on manufacturers passing liability costs back to consumers, who can then make intelligent purchases based upon the true costs of products.

B. Policy Implications of New York’s Version of Market Share Liability

The traditional tort requirement of causation in fact fails to further tort goals of deterrence and compensation. Professor Fischer provides the following illustration:

Suppose a falling tree that had been struck by lightning injured plaintiff. If plaintiff were able to establish that a railroad company was negligent in failing to equip its locomotive with a whistle, a court could further the tort policies of compensation and deterrence by imposing liability for plaintiff’s injury upon the railroad company, even though no causal connection existed between the company’s negligence and plaintiff’s injury. As long as the railroad company understood that liability was being imposed upon it because of its negligence, it would have an incentive to equip its locomotives properly in the future. At the same time, requiring the railroad company to compensate the injured party would further society’s interest in compensating accident victims.

Thus, market share liability fails to profoundly effect these goals.

The goal of assessing moral blame flounders in the context of “traditional” market share liability. The plaintiff may not have even joined the culpable defendant. This problem is magnified under the New York theory, where there certainly will be cases where a defendant could exculpate itself if given an opportunity. The policy of assessing moral blame is further watered down as courts decrease the threshold of “substantial market share” below the ninety percent level. This problem is intensified if market share is expanded to industries which, unlike the DES market, are not concentrated in a relatively few firms.

Perhaps the most profound policy effect of market share liability transpires in the area of encouraging useful conduct, or avoiding overdeterrence. The consequences of over-deterrence include disincentives for safety to unsafe manufacturers, and a reluctance by “leading edge” companies to introduce new products for fear of potential liability. “By apportioning damages throughout an industry solely on the basis of market shares and irrespective of safety efforts, it enables unsafe manufacturers to spread the burden of their accident costs and thereby creates disincentives for safety.” Further,

it has also been pointed out that imposing the market-share theory in a strict liability tort case gives rise to a form of absolute liability by relieving the plaintiff of proving defendant’s breach of duty and by guaranteeing plaintiff’s proof of causation, which ‘forces an industry into the position of an insurer of a product.

In reflecting on the over-deterrence issue, liability expert Peter Huber asks and answers the question who fled most quickly from the baying tort pack? Those quickest on their feet, of course-the person of action, the company of initiative, the mover, the shaker, and the doer. In characterizing the damper placed on innovation by excessive tort liability, he states in the very markets where the legal pursuit was the most intense … the mood among suppliers became most sullen, hostile, defensive, and then coldly stagnant.

As an example, Huber states “research expenditures by U.S. companies working on contraceptives peaked in 1973 and plummeted 90% percent in the next decade.” Huber quotes the president of a major pharmaceutical company, reflecting on the amount of litigation and asking “who in his right mind would work on a product today that would be used by pregnant women? Society suffers because “it is the innovative and unfamiliar that is most likely to be condemned.”

Empirical evidence on the over-deterrence effect is difficult to find. According to one author, “the inquiry is enormous because virtually every corner of society has been reached by the liability revolution, and frustrating because each story is unique, with much of the evidence anecdotal in nature and hard to document or quantify.” In the pharmaceutical industry, much of the evidence that is available centers around the highly visible areas of contraception and vaccines. It is safe to say, however, that the number of product liability lawsuits filed in the U.S. is increasing at a staggering rate. Between 1974 and 1988 the number of product liability lawsuits filed in federal district courts increased by 983 percent.

Because of the limited availability of concrete evidence, it becomes necessary to infer over-deterrence from certain market characteristics. For instance,

in 1980, experts writing in International Family Planning Perspectives predicted that long-acting hormonal rings, vaginal rings, new injectable preparations, postaglandins to induce early abortions, IUDs causing less bleeding and pain, and cervical caps are in advanced field trials with thousands of women, and should be widely available in the contraceptive industry within the next three to five years.

Though some of these products are now available in Europe, nine years later not one is available in the U.S. A plausible explanation for the availability of the drugs in Europe and not in the United States is the liability crisis.

C. Attempts to Expand Market Share Liability Outside the DES Arena

Courts limit the doctrine of market share liability to DES cases. Innovative plaintiffs attorneys, however, diligently attempt to apply market share liability outside the DES context. Examples of actual attempts at expansion range from vaccines to asbestos and even to a ruptured breast prosthesis. The Sindell court implied that “the market share theory… conceivably could apply to all potentially harmful fungible products made from an identical formula.” Thus, market share liability could conceivably embrace “the manufacturing and marketing of cigarettes, food additives, generic drugs, asbestos, pesticides, aluminum wire, industrial waste, and products that cause environmental pollution.” Fortunately, at this juncture attempts at expansion fail.

A recent New Jersey case illustrates careful reasoning by a court in refusing to expand market share liability. In Shackil v. Lederle Laboratories, the plaintiffs filed a medical malpractice and products liability action arising out of the 1972 inoculation of an infant plaintiff with what is commonly known as the DPT vaccine. The plaintiffs could not identify the specific manufacturer, so attempted to invoke market share liability. In refusing to accept the theory, the court rationalized that the imposition of market share liability would frustrate public policy and public health considerations by “threatening the continued availability of needed drugs and impairing the prospects of the development of safer vaccines. The court also paid heed to the fact that recent market trends threatened the supply of DPT and that due to extreme liability exposure there were only two current producers of the drug. While the Shackil court found no liability, it addresses the potential problems inherent in imposing too much liability on an industry as vital to our health and welfare as the drug industry.

D. Legislative Question

Some commentators suggest a legislative or administrative compensation plan when injured persons cannot identify the specific manufacturer responsible. Suggested alternatives include:

a limited no-fault product liability fund for plaintiffs unable to identify the manufacturer of a generic product that produced a latent injury;
suits against the federal agency responsible for regulating the particular industry using the Federal Tort Claims Act and the Administrative Procedure Act;
ad hoc congressional responses to mass injuries caused by products of unidentifiable manufacturers;
legislation designed to hold certain industries liable through trade associations for all injuries caused by those industries’ products whenever the manufacturer of an injury-causing product is not identifiable;
a no-fault compensation system for persons injured by DES which would be funded by a tax imposed upon all manufacturers who produced DES for use as a miscarriage preventative;
and a toxic tort compensation system not limited to a single industry or a single type of product-injury but designed to deal with the toxic tort problem as a whole.

Schwartz and Mahshigian suggest a particularly appealing legislative solution which grasps the following general principles:

the tort system should guide recovery when a particular defendant can be identified;
in non-identification cases, the claimant should be required to show fault, causation, damages, and a good-faith, genuine attempt to identify the manufacturer
legislation should penalize plaintiffs and counsel who falsely identify a defendant … including defendant’s legal costs and a possible civil fine;
the legislation should strongly emphasize causation-that the product actually caused plaintiff’s injury;
and damages should be limited to the claimant’s true excess economic losses, which means no damages for pain and suffering.

Specific provisions of the Schwartz and Mahshigian plan remedy many problems cited in this Note. First, this scheme places the burden of proof on the defendant only when information is in the defendant’s control.211 Second, the plan provides that all manufacturers of DES should contribute to compensation paid to plaintiffs, calling this provision “fairer than the random targeting of defendants that occurs under current judicial theories.” Third, payment by the individual manufacturers “furthers the cause of effective deterrence of (and where appropriate, penalty for) tortious behavior.” Fourth, a properly applied legislative solution would lower the administration costs of the present tort system. Finally, limiting recovery to economic damages lessens the burden on manufacturers. This relief conceivably inures to the benefit of society in the form of lowered prices and increased innovation.

Another attractive legislative solution is the adoption of a federal products liability statute that pays more credence to FDA approval. An Institute of Medicine study recently advocated that, as a general matter, there be no liability for design defect or inadequate warning if the FDA has reviewed and approved the contraceptive product or the warning and has addressed the characteristics of the product that caused the plaintiff’s injury. The defense should not be available if the manufacturer withheld relevant information from the FDA in the approval process or if information developed after approval was not reviewed by the FDA for the purpose of determining whether the product or its labeling should be changed.

The added certainty which a uniform statute provides would allow manufacturers to divert more funds into the research and development area, and would allow the introduction of innovative new products without fear of excessive liability.

V. CONCLUSION

Looked at from a societal perspective, market share liability fails horribly. It merely perpetuates the overall liability crisis in America. Society suffers from increased prices, decreased safety, and a reluctance to market beneficial new products. This crisis begs for a return to traditional tort theory.

The New York version of market share liability assumes a perfect world. It requires uniformity to meet its initial goal of averaging. Thus, it only “works” if all fifty states apply the same rationale. Absent uniformity it becomes grossly unfair to defendants. Given that at least six states explicitly reject market share liability, and that only a half dozen others adopt the theory, the prospect of uniformity is slim. Therefore, if one buys into the market share concept, the only way to assure perfect compliance is through comprehensive federal legislation.

The Hymowitz decision allows “offensive” use of market share liability even when the defendant DES manufacturer can prove that it absolutely did not manufacture the particular drug taken by the plaintiff. Extending this logic to its natural conclusion, perhaps a defendant should be able to use market share “defensively” when the plaintiff can identify the culpable manufacturer. Thus, a defendant marketing five percent of the DES produced for use during pregnancy would only be liable for five percent of plaintiff’s damages even when identified as the culpable party. The overall ‘liability of a particular defendant would then coincide perfectly with culpability. To hold otherwise “transforms the market share liability theory into a lottery based on the fortuity of the availability of evidence in a particular case. The outcome, of course, is absurd.

Mike D. Murphy, 1990.

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